Good morning, ladies and gentlemen, and welcome to Platform Specialty Products Fourth Quarter and Full Year 2016 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Carey Dorman, Director of Corporate Development. Please go ahead.

Good morning, everyone, and thank you for participating on our fourth quarter and full year 2016 results call. Joining me this morning are our CEO, Rakesh Sachdev; CFO, Sanjiv Khattri; Ben Gliklich, our EVP of Operations and Strategy; Scot Benson, President of Performance Solutions; and Diego Lopez Casanello, President of Agricultural Solutions. Please note that in accordance with Regulation FD, or Fair Disclosure, we are webcasting the conference call. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Platform is strictly prohibited. Before we begin, please take note of Platform's safe harbor and cautionary statement included in the press release and supplemental slides issued and posted today in connection with this conference call. The company expects to avail itself from a filing extension for its 2016 Form 10-K as permitted under Rule 12b-25. As a result, all financial results presented today for the fourth quarter and full year 2016 are subject to the completion of the company's audited financial statements and filing of its Form 10-K within the 15-day extended filing period. Some of the statements made today may be considered forward-looking. All forward-looking statements are based on currently available information, and Platform's reported results could differ materially from those presented today. Platform undertakes no obligation to update such statements as a result of new information, future events or otherwise. Please refer to Platform's SEC filings for a more detailed description of the risk factors that may affect Platform's results. Please also note that in the press release and the supplemental slides, Platform has provided financial information that has not been prepared in accordance with U.S. GAAP. In accordance with Regulation G, Platform is providing reconciliations of these non-GAAP measures to comparable GAAP financial measures in both the press release and the supplemental slides, which can be found on Platform's website at www.platformspecialtyproducts.com in the Investor Relations section under Events and Presentations. As a reminder, for the purposes of this call, Platform will be comparing the same period in 2016 and 2015 on a comparable and a comparable constant-currency basis as management believes that these figures provide a better comparison and understanding of the underlying business results for its operations. Comparable information assumes full period contribution of all Platform's acquired businesses to date. Please review the press release and the web deck for further information. It is now my pleasure to introduce Rakesh Sachdev, Platform's CEO, for opening remarks. Rakesh?

Thank you, Carey, and good morning. 2016 was a strong year for Platform, and we ended the year in a particularly positive note. We made progress against many of our objectives, and I'm pleased to report that our overall results met our expectation. In light of another year of challenging end markets, we improved in several critical areas, and we demonstrated the underlying strength and quality of our businesses and people. Both of our operating segments demonstrated organic growth and significant adjusted EBITDA margin improvement. Our full year adjusted EBITDA of $769 million exceeded our revised guidance range and represents constant currency growth of 6% versus the prior year. We generated over $100 million of free cash flow and meaningfully improved our balance sheet. We also continued to make significant strides in our integration efforts in both of our business segments. We have largely completed our Agricultural Solutions integration, and have made considerable progress in unifying both the commercial efforts and supply chains of our Performance Solutions businesses. Less obvious in our financial results is the important progress we have made on our new products pipeline and the capital investments we made in several new commercial areas where we are targeting above-market growth in the coming years. Our focus on improving the balance sheet and cash flow profile of the company also led us to be quite active over the capital markets in the second half of 2016. We retired our Series B convertible preferred stock with proceeds from a successful equity issuance. We then reprised all of our term loans, which will generate an estimated annual interest savings of approximately $26 million. Finally, we made demonstrable progress in our cash tax position. While our cash taxes this year finished in the range given in our Q3 call, this was…

Thank you, Rakesh, and good morning. As you heard already on the call, our integration wins drove both sales and margin improvements in 2016. In the fourth quarter, between both businesses, we generated $19 million of incremental year-over-year cost synergies. On Slide 11, you can see that we reported $8 million of new cost synergies from the Ag integration in Q4, and a total of $28 million into our P&L year-over-year. On a run rate basis, we exited 2016 having actioned $85 million of cost synergies, which are either in the P&L already or will almost entirely be in the P&L by the end of 2017. This year was focused on supply chain, back office and product rationalization synergies. We also spent significant time on commercial initiatives, like R&D prioritization and strategy development. We believe our Ag business is in a strong place after 2 years and is poised to benefit nicely from an inevitable recovery in the ag market. The $85 million of run rate cost synergies exceeds our target of $80 million and took us only 2 years to action. Rather than increase our synergy commitment 2 years into the integration, we've instead chosen to shift the focus to one of continuous cost improvement. This is something we outlined at our Investor Day last September. Our team remains focused on cost, on minimizing nonstrategic SG&A cost, like back office function and indirect procurement, as well as optimizing our sourcing cost and facility footprint to improve gross margins. We have identified over $100 million of cost savings that we are targeting to achieve in the business over the next 5 years, and which we will pursue regardless of market conditions. Revenue synergies were another avenue of success from the Ag integration, where we realized approximately $14 million of benefit…

Thank you, Ben, and good morning, everybody. I'm going to review our financial performance for the full year, spend some time on our adjusted EBITDA guidance and provide some more detail on cash flow, the balance sheet and FX. Similar to what we have been doing every quarter, we are providing numbers on an actual but also on a comparable basis. Comparable results assume that we owned Alent and OMG businesses for the whole year in 2015. We also compare certain results on a comparable constant-currency basis in order to illustrate the impact that translational currency movements have on our financial performance. Finally, as we indicated in the footnote on Slide 4 of this deck, we used certain non-GAAP measures to provide what we believe is useful additional information for you as you analyze our results. We believe these non-GAAP metrics provide better insights into the business. We discussed the adjustments in detail and provide reconciliations in the Appendix of this presentation and in our release filed this morning. Let's start with a quick review of the numbers on Slide 13. For the full year, net sales increased 41% over 2015, primarily due to the acquisitions we did in 2015 and early 2016. The year-over-year organic sales growth of 2%, obviously, also contributed to the GAAP growth as well. GAAP diluted EPS was negative $0.63 per share, which is slightly less negative than last year's number due primarily to an increase in operating profit and a decrease in our tax expense, offset by higher interest expense. On an adjusted basis, diluted EPS for 2016 was $0.63 per share, up $0.03 from last year, with the increase in sales and earnings offset by an increase in other expenses and interest expense. You can see the share count we used in the…

Thank you, Sanjiv. As we did last year, we are providing our key priorities for 2017. The themes are consistent with last year, but the slight modifications are meaningful. Our first priority is to continue the positive momentum we established in 2016. This is true for the business segments, for our corporate functions and for the interaction between the 2. The second is to continue our efforts to focus on fast-growing commercial areas. Progress in this will be measured over a number of years, but we expect to continue to see incremental improvement. The third priority of cost savings from synergies has been adapted slightly to include continuous improvement initiatives to emphasize that improvements in our cost base are an expectation for the businesses even after an integration is complete. And finally, generate free cash flow. We are committed to get back to our targeted leverage of 4.5x within 3 years from last September. We believe many of the steps we are taking on cost, working capital, interest and taxes will help accelerate the free cash flow growth in the business, and we expect it to continue. Before I turn the call over, I want to thank all of our employees, our customers and our other partners that helped make our first year here a success. These results do not speak to the efforts of any one person or any one region or any one business. They are the results of a combined collaboration, where everyone did their part and more. And I hope we can continue to momentum in 2017 and beyond. Thank you. And now, operator, please open the call for questions.

[Operator Instructions] And our first question comes from the line of Daniel Jester of Citigroup.

So on the synergy realization, you've consistently exceeded your targets for the Ag business, and the Performance business is also running well ahead of the goals that you've outlined. So is it fair to assume now that you're going to exit 2017 at a full run rate for all the cost synergy guidance you've provided?

Dan, this is Ben Gliklich speaking. We've articulated what we expect to be the incremental synergies we'll realize in the P&L this year on our guidance bridge. We should be close in terms of reaching run rates, but I wouldn't say we will be fully there. And of course, as Rakesh mentioned, I mentioned, there's a continuous cost improvement mindset at the company, and so once the integrations are complete, we'll still continue to be looking to optimize our cost footprint.

So to answer that, Daniel, we will have a little spillover in 2018 from the stated synergies that we've announced. But on top of that, we are kicking off -- we have kicked off a program to get continuous improvement, cost reductions in the Ag business. We have outlined that today. It's a $100 million opportunity that we're going to go after over the 5 years, and we'll give you more clarity on that. But we still see a lot of opportunities in the years to come.

Okay. And then on the Ag pipeline, which I think you valued at $1.3 billion today. I think the last time you disclosed that, it was closer to $700 million. So obviously, it's a big increase. Can you help us figure out the different buckets here? How much of that is for not [ph] secure? How much of that is you revaluing some of your other key products? And kind of any example to help us think about how that's going to evolve from here would be great.

Sure. Let me turn -- maybe I should ask Diego to give you a little more color on that. Diego?

Yes. I mean, we don't give details on every single project, but I can give you some color behind the $1.3 billion. We say that we want to achieve 15% of our gross profit every year with products that have been reduced [ph] in the last 3 years. So this pipeline is going to help us sustain that performance over time. What I can tell you is that we have 7 new active ingredients that have been advanced into project stage, of which 5 active ingredients are the result of collaborations with key partners. We're talking about multinational companies. We're talking about Japanese producers with research focus and some start-ups. Very exciting projects. We have one new herbicide, a broad-spectrum herbicide. We have 3 new insecticides in the pipeline. We have 2 fungicides, one new biostimulant. So a lot of really very interesting leads, and we will be updating you in the quarters to come of the progress at that time.

And our next question comes the line of Ian Bennett of Bank of America.

So could you just comment on -- the press reported a couple of weeks ago that Platform hired a strategic adviser and was exploring strategic alternatives. Just any broad-based comments on that would be helpful.

Sure. So obviously, Ian, we're not going to comment on rumors or speculations. There are always rumors out in the marketplace. What I would say is, today, we have 2 really outstanding businesses. And I think you've seen the evidence of how both businesses performed in 2016. And our role is to continue to grow these businesses, both organically, and drive the businesses up in achieving greater heights. And that's what we are doing, that's the plan right now.

Okay. And just as a follow-up. It seems like the outlook for Ag is -- growth a little bit below the long-term targets and Performance Solutions is above the long-term targets, at least for 2017. Can you comment a little bit about what you view as cyclical versus Platform-specific? And then also, now that cash flow generation is improving if -- these capital investments and increased registration, when you anticipate perhaps an acceleration in growth?

Yes. So I think when you look at the underlying growth in the Ag business in 2017, the reason the headline numbers may look a little weaker is because we are making a change in the way we're doing business in Africa, and that's going to lop off between 1% to 2% of growth in the Ag business. But we think that's -- we're recalibrating our business there. These are fairly low-margin businesses, so we don't make a whole lot of money. But from the top line, it shows a little weakness. But rest assured, outside of the Africa business, if you look at -- in 2017, we expect Latin America to be strong. We expect North America to be also good. We expect Europe to be somewhat muted compared to last year. I think we'll see how Europe plays out. I think as you heard Sanjiv, the first half of the calendar year is the strongest time for Europe. We have started off Europe with a fairly cold climate that's very dry, and so I think that sales in Europe are going to be pushed into the second quarter. And so we are just being a little cautious about Europe. But other than the Africa situation, I think this business should grow in the low to medium -- mid-single digits in the Ag business. The Performance Solutions business, we already talked about. Just to give you a little more color in 2017, I think the electronics business has started off strong. We ended the year strong, and I think we are seeing that strength even play out in the early few weeks of 2017. So I think we expect to see a strong start in the year in our Performance business. Still thinking that Asia will be a good driver of growth for our performance business this year. And so -- and that's why we said we expect organic growth in the Performance business in 2017 to be higher than what we saw in 2016.

And our next question comes from the line of John Roberts of UBS.

In the crop protection area, there's going to be a number of megadeals potentially closing in the next several months. Do you think that's going to present any incremental opportunities or threats to your Ag business?

No, listen, we are aware of what might come out of this. Frankly, much of what might come out doesn't really fit into our business model. A lot of them are for the raw crops and they are large products that -- we are much of a niche player. We are very focused on what we do. So I think in terms of them presenting an opportunity for us, I think they're likely to be limited. And for the same reasons, I don't think there are likely to be any threats.

Yes. If I could make one comment. At the Investor Day in September, Diego sort of revealed these 5 new strategic segments that we're focusing on. And the whole strategy process that we went through to develop those segments took into consideration these -- the development of sort of the mega Ag chem, and the big 6 going into the big 4, if you will. And so our strategic segments where we believe we can win, these are segments that are high margin and will grow faster than the market, are areas that we think we can win in the context of bigger competition, because they're niche and specialty which aligns with our existing footprint and capabilities.

And our next question comes from the line of Neel Kumar of Morgan Stanley.

Your outlook for Performance Solutions seems to embed [ph] continue market share gains for Alpha. Can you maybe just discuss that a bit further and quantify us -- for us like how much it's expected to contribute to your growth in '17?

Yes. So I think we said we are benefiting from both market growth and we are definitely taking shares in -- particularly in Asia. And I know Scot is on the phone, and I'm going to ask Scot to round up the Performance Solutions business, maybe to put -- give you a little more color. Scot?

Yes, sure. One of the key areas that we're focused on within our Alpha business is in the new power supply markets, primarily going into electronic or electric automobiles around the world. And we've made some really nice share gains as it relates to that with some technology we think we have a leadership position in. That, coupled with the cross-vertical selling opportunities that we're working with gigantic global players and our ability to have so many more multiple touch points within that electronic supply chain, is opening up additional opportunities for us in basic core electronic assembly as well. So it's really a combination of core products and some really focused new technology sectors that's going to help drive growth in Alpha for the coming years.

And our next question comes from the line of Robert Koort of Goldman Sachs.

This is Chris Evans on for Bob. Regarding deleveraging and debt reduction plans. I guess, how much contribution would you expect from restructuring sort of those high-interest term loans as the call protection wanes in '18?

Chris, obviously, as we've shown in Q4 last year, we have been very opportunistic with the market, and you should expect us to continue to maintain that opportunism. We have a significant protection whereas we can refinance our term loans at very short notice, and you should expect us to remain opportunistic. I don't want to commit to any specific plans on what we would do, but our actions speak for themselves.

Got you. And then, I guess, regarding your tax planning. Obviously, your rate is maybe a little punitive, given your geographic exposure. Can you give us a little more insight into where that comes from and where you might be in a year or 2 in terms of your tax rates?

Well, as I've been saying on these calls, real tax planning takes time. Having said that, I'm still very proud of the team in terms of what they were able to do in '16, specifically some of the countries in which we end up paying a lot more in cash taxes, which is more the reflection of our tax structure there and also the significant local profitability. Brazil, China, Mexico, those are probably our 3 primary countries. And then, there is still some further leakage in Western Europe, France, Belgium, Netherlands. Having said that, I think our game plan is looking at both, what I call, tactical things, like looking at our global transfer pricing footprint, looking at our global sourcing procurement footprint, looking at our global IT footprint. Those are all areas where the team is spending effort working with -- closely with the business to see whether we have opportunities. Separately, as we -- Ben talked about integration and synergies. We are also looking at legal structure integration and tax structure integration in several countries, China, Germany, Hong Kong, where we should be able to then benefit with lower taxes.

So is it fair to assume tax rate should be noticeably -- observably lower in the near term then?

These things take time. I think we will give you guidance and quarterly updates.

And our next question comes from the line of Duffy Fischer of Barclays.

This is Mike Leithead on for Duffy this morning. Ben, on the synergies and costs side, you identified $100 million of additional cost opportunity in Ag over the next 5 years. Curious if you have similar line of sight in the Performance business for additional cost takeout.

So the Performance business right now is focused on integration. We've set an ambitious target of $70 million of realized synergies over 3 years. We delivered $30 million or so of that in the first year. We're going to stay focused on integration, customer first integration. There's plenty of wood to chop there. Once that integration is complete, obviously, as Rakesh mentioned, we'll continue to focus on managing cost.

Well, I -- the thing I would say is we are really focused on developing a continuous improvement mindset. And right now, the Performance guys have -- they're -- I mean, they have a lot on their plate in terms of just integrating the recent acquisitions they made. So they're going to deliver on that, but you can be rest assured, just like in Ag, as we have moved into a continuous improvement phase and have identified this $100 million of opportunity, they're going to get to that phase also in the Performance Solutions business.

Great. And then just one more. Just curious, with shares recently at, say, their highest level in the last 14 months or so, I just want to be clear, can we rule out any further equity issuances that would accelerate the deleveraging process?

No.

Yes. I mean, I don't think we have any plans to do that.

And our net question comes from the line of Jon Tanwanteng of CJS Securities.

Sanjiv, I appreciate the detail on the cash flow expectations for 2017. Can you just give us your take for changes in working capital as well as any other nonrecurring items or synergy realization costs heading to the new year?

So the way we look at working capital is you obviously have to look at the absolute levels, but the real good metric of evaluating working capital is as a percentage of sales. So this year, we used up about $16 million, so absolute numbers actually went worse due to FX. But if you look at the sales growth we achieved, our working capital as a percentage of sales actually improved. We have the same focus for '17. As part of our metrics that we use on a monthly basis, working capital is a key metric. And the whole team, not just finance, but the whole team is really focused on improving that. I still expect working capital to be a modest use in 2017. However, as a percentage of net sales, we continue to expect further improvement.

Got it. And other nonrecurrent costs of -- for synergy realizations or restructurings?

I think, clearly, depending on the type of synergies being executed, there are some cash costs that are normalized for performance metrics. Those relate to people exit costs and also facility rationalizations. And we expect that to be, having said that, versus 2015 and 2016, these amounts are a lot more modest. Which is consistent with what Rakesh had been driving, that we do need to have free cash flow for 2017 significantly higher than what it was in 2016.

Okay. Ben, just going back to the $100 million in identified cost saving in the Ag business, how should we think of that in timing? Or is that a low-hanging fruit, which make that happen sooner or later? Or should we think of it more as a straight-line improvement going forward?

Diego, you want to...

We don't disclose the -- an exact phasing. But I think you can take a linear development for the time being, and we would be updating you over time. But we are very confident on our ability to deliver those $100 million. And the team is doing a great already on implementing '17, a good part of it.

Great. And then, finally, Rakesh, rumors aside, have there been any changes to the philosophy for or against divestitures, especially given the valuations of some of your peers out there to accelerate the balance sheet recovery?

No. Listen, not really, we are always focused on value creation for our shareholders, that's a given for any public company. But having said that, I can tell you I'm very pleased with the 2 businesses we have. The run rate for both these businesses look very good, and we're going to continue to drive growth from both these businesses.

And our next question comes from the line of Jim Sheehan of SunTrust.

This is Matthew Stevenson on for Jim. Quick question. I know in the past, you've described the Performance business as really being more of a sequential story than a seasonal story. But I've also noticed that there has been, it seems, 1Q softness over the past couple of years, both on the sales side and on the margin side. Could you elaborate a little bit on that and what we might expect to see in the first quarter of '17?

Scot, do you want to talk about the Q1?

Sure, sure. I think what you normally see in Q1 from our business is that there's a bit of an effect from Chinese New Year. So we have seen a good start to this year. We kind of like to wait and see January and February combined, because that takes out a little bit of that mitigation from the Chinese New Year effect. But primarily, that's really the only thing we see from a seasonality standpoint.

And I would just add, Matthew, you are totally right, MPS is a sequential business. Having said that, due to the timing of the synergies, we still expect, even for MPS, the second half to be much stronger. So year-over-year, MPS will be better every quarter. But again, it will be still a second half, first half story based on our current forecast.

Understood. And then in North America, there was a comment in the seasonality slide that you're expecting a shift from 1Q into the second quarter. Is that weather related or...

That was a comment on Europe. It was -- because Europe, in Q1 of last year, we had a very strong first quarter last year because we had an early spring. And unlike last year, this year, I think the spring is delayed because it has been cold in Europe and it has been dry. So that's -- so the point was really related to Europe, not North America. Okay. Should we take one more call? I know we are past the time. Yes.

I'm showing no questions on the phone lines at this time.

Okay. I just want to thank everybody for joining us this morning, and we'll give you an update the next time we talk. Thank you so much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.